Ulta Beauty (ULTA) gapped sharply lower Friday after the cosmetics retailer reported earnings and noted that margin expectations for the coming quarters are shifting lower.
Let's check and see how ULTA looks in the mirror and the charts.
In the daily bar chart of ULTA, below, I can see Friday's downside price gap and continued weakness. ULTA was already trading below the declining 50-day moving average line and Friday gapped below the 200-day line. The shares are pushing well into prior resistance and now expected support starting around $235.
Trading volume is heavy as traders vote with their feet. The On-Balance-Volume (OBV) line shows weakness from the beginning of May. The Moving Average Convergence Divergence (MACD) oscillator is in a bearish alignment below the zero line.
In the weekly Japanese candlestick chart of ULTA, below, we have to imagine this week's candle pattern as this chart won't be updated until Friday's close. ULTA is trading below the 40-week moving average line. The $450-$375 area was prior resistance and may not act as support (hopefully). If prices put more than halfway into this support zone they are likely to go all the way through.
The weekly OBV line has started to turn down and the MACD oscillator crossed to the downside in March/April for a take profit sell signal.
In this daily Point and Figure chart of ULTA, below, I can see that prices reached and exceeded a downside price target in the $441 area.
In this weekly Point and Figure chart of ULTA, below, I can see a downside price target in the $297 area.
Bottom-line strategy: ULTA fell out of bed today. It fell hard and it looks like it can weaken further. Avoid the long side and don't try to catch a falling mascara pencil.
Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.
